While firms have their own strategies for enhancing resilience, governments can play a key supporting role. This chapter reviews policy actions to enable agility, adaptability and alignment in supply chains. These include trade facilitation policies to reduce friction at borders, service sector regulations that facilitate the smooth operations of supply chains and to allow companies to adopt digital tools, and mechanisms to foster international and public-private co-operation on supply chain issues
OECD Supply Chain Resilience Review
Navigating Risks
Abstract
Not every disruption or delay is a market failure requiring government intervention. Policy does, however, play a key role in fostering the enabling environment in which firms pursue agile, adaptable and aligned supply chains. Public policy facilitates, integrates and provides infrastructure and emergency resources in co-operation with the private sector. Government action also addresses major risks or disruptions that exceed firms’ capabilities of routine risk management.
Several policy areas can have a high impact on the agility and adaptability of supply chains, as well as the required alignment of interests among stakeholders:
Trade facilitation measures for goods. The ability for firms to quickly adapt the organisation of their supply chains (including in the case of major crises) depends on efficient logistics and a reduction of trade frictions. Through trade facilitation measures (the streamlining of import and export processes), governments can reduce the costs associated with moving goods, meaning firms have less need for excessive inventory. Frictionless trade is particularly important during emergencies, when expedited import and export of goods can save lives.
Efficient services regulations that smooth supply chain operation. The reduction of trade frictions and transaction costs can more broadly come from efficient services regulations that enable the smooth operations of agile manufacturing supply chains, not only for transport and logistics, but also for a series of support services that are needed at the various production stages (e.g. IT services, professional services, financial services, etc.).
Policies that enable the wider adoption of digital technologies by firms and an enabling digital trade policy environment can also help firms’ agility in reacting to disruptions. The digitalisation of supply chain operations offers avenues for better forecasting of demand and a better flow of information to anticipate risks and identify bottlenecks.
International co-operation, and co-ordination with the private sector. Aligning strategies between governments, and between firms and governments, is another vital key to resilient supply chains. International co-operation is fundamental to addressing the systemic nature of supply chain vulnerabilities and the cross-border nature of regulatory challenges. Co-ordination with the private sector can align stakeholders’ interests and is a practical way governments to effectively influence firms’ strategies. It also increases the level of preparedness and the speed at which firms and governments respond to shocks and create emergency supply chains.
This chapter reviews specific policy options to: reduce trade frictions; to improve the regulation of services, facilitating the smooth operations of supply chains; to support the adoption of digital tools by companies; and to foster public-private co-operation on supply chain issues.
Trade facilitation policies for goods aim to make trade and customs laws, regulations, documents and procedures simpler and more efficient. They play a key role in streamlining and simplifying the technical and legal procedures at the border for intermediate and final products to be traded internationally. Such policies proved essential during the COVID-19 pandemic, with trade facilitation measures taken at the border making it possible for supply chains to continue to deliver goods where they were needed.
When the COVID-19 pandemic struck, disruptions in cross-border trade led to higher trade costs. These were linked to new protocols, additional border controls, and new administrative requirements for traders and carriers. Impacts varied by product, trade route, mode of transport, and country, affecting the functioning of supply chains in uneven ways across sectors and regions. The urgency of the crisis prompted many economies to implement measures such as “green lanes” for streamlining border controls or exchanging specific trade documents electronically. These trade facilitation measures enabled complex supply chains to adapt in record time to provide the specialised inputs needed for the large-scale production of COVID-19 vaccines and other medical goods (UNESCAP, 2021[1]; OECD, 2022[2]; WTO, 2022[3]).
Trade facilitation measures also play an important role in boosting competitiveness, as inefficient processes at the border add to the cost of doing business internationally. This can benefit all stakeholders, but particularly developing economies and small and medium-size enterprises (SMEs), which face relatively higher costs when engaging in international trade.
As we emerge from the COVID-19 crisis, geopolitical tensions, climate change and other disruptions to global logistics are, however, all increasingly affecting how we trade. At the same time, new regulations linked to environmental and social sustainability – often enforced at the border – are increasingly impacting firms across their entire value chain (Chapter 4).
Against this background, trade facilitation measures can contribute to policy environments that enable agility, adaptability and alignment in three main ways:
Enhancing agility in the face of more frequent, high-impact supply chain shocks and disruptions. This can be done by designing co-ordinated approaches between points of entry and exit, such as ports, in response to shocks or prolonged disruptions to logistics operations. These approaches need to rely on transparent and predictable trade-related information, streamlined border processes, and co-operation between public and private stakeholders. Reducing costs and frictions through trade facilitation reforms will also support traders in identifying new suppliers or new buyers when confronted with disruptions.
Being adaptable as sustainability regulatory requirements proliferate and have an impact at the border. Firms are increasingly being requested to track and provide information to meet market demands aimed at ensuring that global value chains comply with environmental and social objectives (Chapter 4). Trade facilitation policies can play an increasing role in meeting these requirements to prove compliance at the border.
Supporting alignment across stakeholders through enhanced consultations with traders and co-operation between agencies at the border. Trade facilitation measures, such as consultations with traders on new and updated border regulations, provide the necessary framework for informing industry about regulatory changes, as well as for compiling first-hand insights into recurring delays, inefficiencies, or inconsistencies at border crossings. Enhanced mechanisms for collaboration between border agencies – domestically and internationally – are also essential for streamlining processes and improving the predictability of shipments.
The OECD’s Trade Facilitation Indicators (TFIs) (Box 6.1) are used in this section to assess areas of progress, as well as strength and weakness, in countries and regions’ trade facilitation policies. The TFIs are also used in the country-by-country annex assessing ease of border processes, as well as regulatory transparency and alignment.
The 11 OECD’s Trade Facilitation Indicators (TFIs) are each composed of several specific, precise and fact-based variables related to existing administrative processes at the border and their implementation in practice (e.g. the average time between publication and entry into force of new or adjusted trade-related regulations, the proportion of trade transactions that can be processed in advance of the arrival of goods at the border, or the coverage of certified trader programmes). The OECD TFIs cover the full spectrum of border procedures for more than 160 economies across different income levels, geographical regions, and levels of development. The 11 TFIs cover four main policy areas.
Transparency and predictability
TFI (A) Information availability: Publication of customs and trade-related regulations and information, feedback mechanisms, and specific functions for businesses (e.g. dedicated webpages/portals, user manuals).
TFI (B) Involvement of the trade community: Structures, guidelines, and frameworks for consultations between border agencies and traders or other relevant stakeholders on proposed or amended trade-related regulations.
TFI (C) Advance rulings: The rules and processes applying to prior statements by the administration to requesting traders concerning, for example, the classification, origin, and valuation method applied to specific goods.
TFI (D) Appeal procedures: The possibility and modalities to appeal administrative decisions made by border agencies.
TFI (E) Fees and charges: Disciplines on the fees and charges imposed on imports and exports.
Automating and streamlining procedures
TFI (F) Documents: Harmonisation and simplification of trade-related documents in accordance with international standards.
TFI (G) Automation: Aspects such as the electronic exchange of data and use of automated risk management.
TFI (H) Procedures: Aspects such as the streamlining of border control (inspections, clearance), implementation of trade single windows, or certified trader programmes.
Border agency co-operation
TFI (I) Internal border agency co-operation: institutional frameworks, mechanisms, and IT systems for domestic co-operation between various border agencies.
TFI (J) External border agency co-operation: institutional frameworks, mechanisms, and IT systems for co-operation between various border agencies with neighbouring economies and other trading partners.
Governance and impartiality
TFI (K) Governance and impartiality: transparency of customs structures and functions, as well as accountability and ethics policies.
The indicators can help policymakers in developed and developing countries alike to assess the state of their trade facilitation efforts, pinpoint challenges and identify opportunities for progress. They also support governments’ ability to mobilise technical assistance and capacity building in a more targeted way. The TFIs Policy Simulator helps identify the key measures driving the performance of a selected country in a specific indicator and simulates the effects of potential policy reforms on overall performance.
Source: OECD (2023[4]), OECD Trade Facilitation Indicators: Monitoring facilitation reforms up to 2023, https://issuu.com/oecd.publishing/docs/oecd-trade-facilitation-update-2023.
6.1.1. Agility in response to shocks and disruptions can be enhanced through streamlined, transparent and automated border processes
Since the COVID-19 pandemic, disruptions to global logistics, in particular shipping and ports, have continued to impact trade flows and supply chains. Disruptions to maritime operations during the pandemic caused severe delays and congestion that rippled through global supply chains (for more on maritime transport, see the case study in Box 6.2). Exposure to shocks is also increasingly affecting ports and shipping routes worldwide: for instance, in 2023, droughts reduced traffic through the Panama Canal by almost 40%. The Panama Canal’s diminished capacity also affected between 10% to 25% of trade flows across ports in Panama, Nicaragua, Ecuador, Peru, El Salvador and Jamaica in 2023. More recently, shipping through the Suez Canal, linking Europe to Asia, has come to a near standstill due to Houthis attacks on commercial ships in the Red Sea since the end of 2023, affecting mainly trade in fossil fuels and agricultural products.
While there are alternatives to such shipping routes (in terms of corridors, ports, or other modes of transport), rerouting can involve longer distances and thus increase the requirement for more vessels and ship carrying capacity. Relying on multiple routes for the transportation of goods to reduce vulnerability or support rerouting in response to shocks will not only depend on the infrastructure for handling extra capacity, but also on a respective economy’s trade facilitation policy environment. Streamlined and automated border processes will allow for more straightforward swapping between ports and other border posts in response to disruptions, while ensuring that any new points of entry and exit do not become bottlenecks. Moreover, transparency and predictability can help map bottlenecks and risks across points of entry and exit of goods and across supply chains, while also transmitting good practices.
Transparency and predictability refer not only to the availability of trade-related information, but also to areas such as advance rulings, fees and charges, and appeal procedures, where differences in regulatory frameworks and operational practices across countries can add significant costs. Analysis of the OECD TFIs (Box 6.1) highlights that transparency of trade-related information has progressed considerably since the entry into force of the WTO’s Trade Facilitation Agreement (TFA) in 2017 (Figure 6.1), by increasingly making necessary information available on import and export procedures, trade documentation required and enquiry points. On the other hand, the COVID-19 pandemic has slowed down the speed of reforms in areas such as advance rulings, appeal procedures on trade-related matters, and streamlining fees and charges, which progressed more rapidly in 2017-19.
In practice, importing and exporting involve a wide range of documents, processes and agencies – this is an even more significant challenge when formalities at the border vary across countries. Measures such as automating and streamlining trade-related documents and border processes, together with border agency co-operation and involvement of the private sector, are important to support the design of co-ordinated approaches between points of entry and exit in responding to shocks and disruptions.
Automation of border processes has been one of the areas that has most improved since the COVID-19 pandemic. Improvements in automation have been driven by the introduction of tools such as automated pre-arrival processing, automated risk management, electronic payments of duties and charges, and digital single windows for trade. The simplification and harmonisation of trade documents and the streamlining of border processes have also continued to improve strongly since the entry into force of the TFA, driven by progress in establishing the regulatory frameworks for trade facilitation.
However, in practice, implementation of several measures is proving more challenging and impacts the speeds at which regions are advancing across the different trade facilitation policy areas (Figure 6.2). Implementation in practice concerns aspects such as the share of documents and trade procedures that can be processed electronically, the coverage of certified trader programmes (i.e. the number of traders and SMEs covered by a programme), and the proportion of trade transactions that can be processed in advance of the arrival of goods at the border.
Trade facilitation policies can also help maintain supply in case of shocks and enable new trade relationships
The ability to identify and rely on a new supplier or buyer is not automatic when importing and exporting involve a wide range of documents, processes and agencies, and goods cross borders multiple times (increasingly to include recycling and reuse). OECD TFI analysis shows that, on average, a 10% improvement in trade facilitation policies is associated with an increase in the number of export markets by more than 6% (Figure 6.3) and in new sectors by almost 15% in some regions (OECD, 2023[5]). This underscores the contribution of trade facilitation reforms to finding new markets and sectors (referred to as “extensive margins”), which is important as they have potential to address disruptions and support diversification in supply chains as a risk management strategy. Increased access to more comprehensive trade-related information, streamlined documentary requirements and border processes, and an enhanced use of digital tools by border agencies can all facilitate access to new markets as they reduce the costs of entering those markets.
Trade facilitation policies can also play an important role in boosting existing trade relationships (referred to as “intensive margins”), with analysis showing that a better trade facilitation policy environment can enhance the intensive margin of trade by up to 9% across different regions (Figure 6.3) (OECD, 2023[5]). This can be particularly important for those supply chains where changing suppliers during a shock can be more challenging, such as when using customised inputs (i.e. inputs designed to meet the exact requirements of a final product). For instance, in smartphone manufacturing, a company might request custom-sized OLED screens with specific resolutions and touch sensitivity, while in the aeronautics industry, custom-engineered alloys or composite materials can be designed for specific weight, strength, or heat resistance for an aircraft component. Simplifying documentary requirements relevant to such customised inputs or including their suppliers in certified trader programmes can help reduce the costs and time involved in trading these inputs, maintaining access during shocks and enabling traded volumes to be increased swiftly to meet demand spikes.
6.1.2. Adapting to increasing sustainability regulatory requirements can be aided by regulatory and technical interoperability across borders
As a result of both voluntary initiatives and mandatory requirements, firms are increasingly being requested to track and provide information on their environmental and social sustainability footprint, often across the entirety of their supply chain, as discussed in Section 4.2.
For many of these requirements, the point of enforcement will be at the border,1 which raises several challenges. First, this demands that a relevant institutional architecture be in place where customs authorities and other border agencies will have a role. It also has implications for the specific requirements for demonstrating compliance (e.g. the type of information that needs to be provided, new or adjusted documentary requirements) and for processes to enable companies to report the information as well as for actors providing certification. Second, in addition to the regulatory interoperability needed to underpin the information required on environmental and social sustainability impacts themselves (i.e. knowing what information needs to be collected and the quality of that information), technical interoperability is then required to support the data elements and documents that need to be exchanged and verified (OECD, 2025 forthcoming[6]).
The same set of key trade facilitation policies discussed above – automating and streamlining trade-related documents and processes, as well as border agency co-operation – thus play a growing role in increasing sustainability standards enforced at the border. Together with behind-the-border processes, such as those linked to conformity assessment procedures, they can support technical interoperability and help reduce costs relating to compliance with trade-related regulations.
Technical interoperability can then contribute to reducing transaction costs and operational inefficiencies (e.g. the requirement to fill in different surveys or spreadsheets to share emissions data) in the sharing of data across different actors and borders. The lack of technical interoperability may be especially burdensome for export-intensive companies operating across multiple jurisdictions, and for smaller firms. Smaller firms often do not have the resources for upfront investments in a data collection and sharing system, or the in-house expertise to prepare Scope 3 emissions data.2 This situation is exacerbated in developing and low-income countries, which typically have less capacity to address these interoperability challenges than developed countries.
6.1.3. Alignment of stakeholders is boosted through consultations between border agencies and traders and co-operation among border agencies
Since the COVID-19 pandemic, strong emphasis has been placed on enhancing communication and co-ordination among domestic border agencies. This has involved a wide range of government institutions and has aimed to enable swift responses to disruptions and ensure the continued flow of essential goods at borders. Improvements in various mechanisms for collaboration – from risk management systems and co-ordinated inspections, to co-ordinated certified trader programmes – have been driving the progress in domestic border agency co-operation.
While improvements are more modest for the area of co-operation with border agencies in neighbouring economies and other trading partners, the TFIs highlight that the overall pace of reform appears to be more ambitious than when the TFA came into force in 2017. However, there is scope to build on the COVID-19 inter-agency co-operation structures to enhance crisis responsiveness and resilience, as well as international co-operation more broadly.
The scope of co-ordination with private sector stakeholders over border processes also needs to expand to devise solutions that can be mobilised when needed to act under pressure and time constraints. In this sense, collaboration between port authorities, shipping companies, logistics providers and border authorities is crucial in managing the overall flow of goods. The OECD TFIs highlight that consultations between border agencies and traders on proposed or amended trade-related regulations are increasingly based on established guidelines and procedures, but could benefit further from widened discussions with a larger pool of stakeholders and from timelier publication of draft legislations prior to their entry into force (OECD, 2023[5]).
The automation and streamlining of trade-related documents and processes are also increasingly interlinked with the digital trade policy environment, such as frameworks for enabling electronic transactions (e.g. electronic transferrable records, e-authentication, e-signatures, e-payments, or e-invoicing) and cross-border exchange of data (Section 6.3). While this provides new opportunities to reduce trade costs and increase visibility of transactions across supply chains, the TFIs show that many of the areas that require sharing of data – such as shared risk management systems and interconnected or shared computer systems between border agencies – are among those with the lowest levels of implementation (OECD, 2025 forthcoming[6]).
In addition, reducing regulatory heterogeneity in trade facilitation policies is crucial for enhancing cross-border trade efficiency, lowering costs and improving supply chain resilience. This is discussed further for trade in services in the section below.
Services are essential to the functioning of global supply chains, enhancing efficiency, cutting costs and ensuring smooth connectivity from producers to consumers. Transport services, including air, sea, road and rail transport, help carry goods across countries, while logistics services help manage the complex flow of goods, optimising inventory management and allocation of capacity and resources. Maritime transport services are particularly crucial for global supply chains as they facilitate the efficient and cost-effective movement of goods across vast distances, ensuring timely delivery and supporting international trade (Box 6.2). Meanwhile, distribution and courier services offer last-mile delivery solutions, crucial for reaching end consumers swiftly, especially in the context of the growing volumes of trade in parcels (López González and Sorescu, 2021[7]). In addition, digitalisation is streamlining supply chains by enhancing communication, improving efficiency, enabling real-time tracking and fostering better decision making through advanced data-driven technologies. Together, these key supply chain services not only streamline commercial operations – they also strengthen supply chain resilience by diversifying transportation routes and modes, mitigating risks associated with disruptions or emergencies, and keeping costs at a minimum.
Transport and logistics services are also pivotal for enhancing environmental sustainability within supply chains. Environmentally sustainable logistics practices, such as the use of fuel-efficient transportation modes, route optimisation and sustainable packaging, significantly reduce the carbon footprint of supply chain activities. By leveraging these services, companies can meet regulatory requirements and fulfil corporate social responsibility goals, enhancing their brand reputation and competitiveness in a market increasingly concerned with sustainability.
Optimal cross-border transport and logistics activities closely depend on good regulatory approaches that minimise unnecessary trade barriers and ensure regulatory interoperability for services providers. Evidence from the OECD Services Trade Restrictiveness Index (STRI)3 shows that there are still substantial barriers to trade across these sectors (Figure 6.4).
Figure 6.5 illustrates the drivers of these barriers. For instance, foreign entry barriers (which limit the ability of foreign services providers to enter domestic markets) are high in most transport sectors (e.g. close to 60% of all barriers in air transport) as well as in courier services (half of all barriers). Barriers to competition contribute around 30% of all restrictions in air and rail freight transport but also make a substantial contribution to restrictions in courier and distribution services. Barriers for regulatory transparency are higher in logistics services (28%) than in other sectors, driven by measures related to customs procedures, licences and entry requirements for transport crew.
Maritime transport is a key sector for efficient connections across supply chains. It is estimated that more than 80% of the volume of goods traded worldwide is carried by sea (UNCTAD, 2024[8]). The market is highly concentrated, with the top five ship-owning countries accounting for half the world’s fleet tonnage in 2024.
Geopolitical tensions, unrest, and protectionist measures can disrupt international trade flows and affect maritime transport routes and operations. Uncertainty surrounding trade policies and trade barriers can also deter investment and reduce potential efficiency gains from streamlining shipping operations. The maritime industry is also facing growing pressure to reduce its environmental footprint, particularly its air and water pollution, and greenhouse gas emissions.
Drawing on STRI data, the following key challenges can be identified that affect international trade in maritime transport services (Figure 6.6):
Restricted access to certain market segments and cabotage operations: Conditions on flying the national flag are not considered a trade restriction per se, but in cases where flying the flag is linked to accessing certain segments of the market, discrimination in registering under the national flag creates restrictions on foreign entry. 93% of the countries covered in the STRI for maritime services(1) impose various conditions to registering vessels in their national registry, thereby limiting the provision of maritime cabotage. 78% of countries prohibit certain cabotage operations for foreign-flagged vessels, while 27% prohibit all cabotage for foreign operators. Cargo-sharing agreements and cargo reservations or preferences for ships under national flag exist in over 20% of the countries covered. Such measures, together with strict cabotage policies, considerably limit the operation of foreign vessels even when this is beneficial to improving efficiency in cargo distribution, alleviating capacity constraints on domestic vessels, and providing incentives for investments in port infrastructure.
Barriers in port services: Ports are often publicly owned, while port services are usually provided by private companies operating under concession agreements. 13% of the countries in the STRI continue however to restrict the provision of such services, including through statutory monopolies that preclude the entry of other port operators. Moreover, concessions for port services granted with exclusive rights to operate exist in 29% of these countries, thus limiting the scope of other services providers at ports. Discriminatory tariffs for port services exist in major ports(2) across 18% of the countries covered and several countries include obligations to use only local auxiliary services, such as towage (29% of the countries covered) or local maritime port agents (13% of the countries covered).
State ownership and market competition: Government ownership or control of major domestic maritime transport operators exist in over 40% of the countries covered, highlighting the high degree of government involvement in this sector. 11% of countries fully exempt shipping agreements from competition law and 16% provide for partial exemptions. In addition, more than half of the countries (58%) have tax relief measures or other incentives for domestic shipping companies to increase the competitiveness of the national fleet.
Reducing these regulatory barriers could help to strengthen the resilience and flexibility of global supply chains by improving efficiency in maritime operations, easing potential capacity constraints and promoting greater investment in port infrastructure and services.
There appears to be a consistent negative correlation between the restrictiveness of both logistics and maritime transport services and various logistic performance indicators measured by the World Bank’s Logistics Performance Index (LPI) (World Bank, 2023[10]). Figure 6.7 highlights correlations between the STRI for these two sectors and relevant World Bank LPI scores for logistics infrastructure, competence and quality, international shipments, and tracking and tracing. Countries with lower trade restrictiveness scores in these areas tend to score more highly across all these indicators, meaning better overall logistics performance. This is especially relevant for non-OECD Member countries, where the level of restrictiveness in logistics and transport sectors tends to be higher.
Moreover, OECD research finds that ambitious efforts to ease barriers to trade in services could yield substantial benefits by reducing trade costs for firms that provide services across borders and by enhancing productivity in manufacturing. In a hypothetical scenario in which countries improve their STRI halfway to the STRI of the best performer in each sector, trade costs in supply chain services could drop by between 5% and 14% on average (Table 6.1). The improvement would be greatest in air transport, with estimated trade cost reductions in the range of 9% to 24%.
Although logistics services are not among the most restricted sectors, any barriers can substantially affect logistics companies’ ability to provide services and thus increase costs. For instance, burdensome customs and border processes can raise uncertainties around scheduled deliveries, and restrictive policies on certain types of logistics activities (e.g. cargo handling, customs mediation, or storage) can affect the ability of suppliers to offer integrated logistics solutions. Thus, even the lowest estimations of trade cost reductions to logistics customs brokerage services (4%) could represent substantial savings for businesses (Table 6.1).
Estimated trade cost reduction of policy reforms in the STRI, 2023 (% of export values)
Note: This table presents the trade cost implications of closing 50% of the gap in their Services Trade Restrictiveness Index (STRI) score with the best-performing countries. All estimates correspond to the median for 50 countries. Calculations based on the methodology in Benz and Jaax (2020[11]).
Source: OECD (2024[12])
Regulatory disparities across countries are another source of impediment that affects the fluidity of international trade in goods and services and undermines alignment and co-ordination across value chains. They breed uncertainty among firms and stifle efforts for alignment and co-ordination across global networks. Heterogenous regulatory frameworks can also increase compliance costs and administrative burdens, deterring companies from venturing into new markets. Closer regulatory alignment among countries can help minimise delays at borders through more efficient and predictable trade facilitation procedures. For services providers, greater regulatory integration enables smoother cross-border service delivery, enhanced market access and competition.
Evidence from the OECD TFI and STRI shows that growing regulatory divergence remains a concern (Figure 6.8). The figure plots countries based on their regulatory environment in trade in services (x-axis) and goods trade facilitation (y-axis), with lower values indicating greater alignment with norms that are considered international best practices. It shows that in general there is closer global alignment on trade facilitation regulations than on services trade. Moreover, regulatory fragmentation is more pronounced in regions such as the Americas and Asia-Pacific, although closer neighbouring countries tend to have more similar regulatory approaches. Countries with higher divergence on both trade facilitation and services trade could benefit from greater regulatory co-operation to help reduce trade costs and improve market access.
Looking ahead, reducing services barriers will be key for strengthening supply chain resilience by enhancing access to foreign inputs, improving regulatory interoperability and encouraging supplier diversification. Countries with fewer barriers in transport and logistics services typically have better logistics infrastructure and more efficient processes. Possible policy considerations might include:
Lifting market access barriers for critical services sectors, notably transport, logistics, financial and telecommunications services.
Working towards greater regulatory interoperability across countries by strengthening common regulatory standards and expanding tools such as mutual recognition of qualifications and permits.
Fostering international co-operation to create a more predictable, transparent and efficient regulatory environment, thereby enhancing global trade in services, driving innovation and promoting economic growth.
Digital transformation plays a critical role in enhancing supply chain resilience, as discussed in Chapter 4. For this, the regulatory environment for digital trade is of primary importance. There are four regulatory areas that affect access to the digital tools and data for supply chain resilience – each of these is discussed in the sections that follow:
Tariff and non-tariff measures that affect access to goods critical for the digital transformation. Such measures can affect the cost of devices that power digitalisation, automation and traceability within supply chains. These goods include computers, laptops, smartphones, sensors and other connected devices. The same is true of any measures affecting the costs of building and maintaining the hard digital infrastructure on which digital networks are built, including access to cables, wires and masts.
Services barriers that affect access to competitive services that underpin digitalisation. Reliable and competitively priced telecommunications services that ensure fast and uninterrupted digital connectivity are key for supply chain resilience (Ivanov, 2024[13]). So is access to top-of-the-range computer services that form the soft digital infrastructure and digital solutions that enable resilience (such as cloud computing services).
Regulatory barriers that affect cross-border data flows. Data that flow across international borders are the lifeblood of modern supply chains (Casalini and López González, 2019[14]). Firms require real-time access to data on ongoing activities across the entirety of the supply chain to proactively monitor, anticipate, manage and respond to emerging shocks. Measures affecting the free and safeguarded flow of data will therefore affect supply chain resilience.
Digital trade openness and integration initiatives. The ability to switch or consolidate suppliers depends strongly on the openness of markets. Common approaches to digital trade facilitation tools, including the recognition of e-contracts and e-signatures, and the ability to pay electronically, as well as common approaches to privacy, data protection or source code, can help reduce transaction costs and enable greater supply chain resilience. Ongoing negotiations under the Joint Initiative on e-commerce, digital trade provisions in regional trade agreements (RTAs), and the Information Technology Agreement (ITA) are the most prominent examples of such initiatives.
6.3.1. Lowering tariffs on ICT goods will boost resilience
Digital transformation hinges on access to hardware: from high performance computing and network equipment, to desktops, laptops, smartphones, data sensors, IoT devices and communication units. These goods underpin the ability of firms to adopt digital technologies as well as the digital infrastructure of the countries in which they operate. Although ICT goods are some of the most internationally traded items, manufacturing is concentrated in only a few countries, particularly in Asia and especially in China (2020[15]).
Tariffs and non-tariff measures on ICT goods can hinder the adoption of digital technologies, potentially affecting the ability of firms to digitise processes and therefore respond to supply chain shocks. While tariffs on ICT goods tend to be relatively low in OECD Member countries, many non-OECD Member countries maintain relatively high tariffs (Figure 6.9).4 This is particularly the case for consumer electronic equipment, but also applies to communication equipment. Reducing tariffs would enable actors within internationally dispersed supply chains to more efficiently source ICT goods for more resilient responses to emerging shocks.
6.3.2. Ensuring an enabling services regulatory environment will free up digital trade
Services are instrumental in supporting the digital transformation of modern economies and therefore in providing the enabling environment, or soft infrastructure, that facilitates supply chain resilience. Telecommunications services, for instance, are the backbone upon which digital networks are built. In parallel, computer services can grant access to solutions that enable greater resilience. These include cloud computing and related services that help firms and other actors across the supply chain to store, process and access data from different locations. Such services can also help firms develop digital capacity quickly, in new locations, without the need for upfront capital costs. An enabling regulatory environment for services which minimises undue barriers to the uptake and use of digital technologies, safeguards competition, data privacy and cybersecurity concerns, and ensures a level playing field, is therefore key to supporting supply chain operations across different markets.
However, evidence from the OECD’s Services Trade Restrictiveness Index (STRI) and Digital STRI (DSTRI) suggests that the global regulatory environment for digital trade has become increasingly tight (Figure 6.10). Barriers to digitally enabled services, as captured by the DSTRI, have grown by 25% in the last decade, as countries take diverse approaches to government digital economy issues. At the same time, barriers to computer and telecommunication services have also risen by 5% and 2% respectively. Overall, this increasingly tight regulatory environment is likely to have a strong negative impact on firms’ ability to react to changes in circumstances as a result of unforeseen shocks. Continued streamlining of these regulations is necessary to enhance the ability of firms to be more agile and adaptable in responding to shocks.
6.3.3. Enabling data flows and transfers will allow for agile supply chains
Cross-border data flows are the lifeblood of today’s international trade and supply chain transactions. They allow real-time monitoring of goods and services as they pass through suppliers and borders, helping supply chain managers anticipate disruptions. They also enable the deployment of proactive measures to mitigate risk through more efficient co-ordination and synchronisation of activities, including between suppliers, manufacturers, distributors and retailers.5
However, the emerging landscape as it relates to data, and especially cross-border data flows, is becoming increasingly complex. Concerns about privacy protection, cybersecurity, national security, regulatory reach, competition and industrial policy have all led to growing number of data regulations which either conditions the transfer of data abroad or mandates that data are stored domestically (Casalini and López González, 2019[14]) (Figure 6.11a). The growing number and restrictiveness of data localisation measures (Figure 6.11b) puts additional pressures on firms to duplicate data solutions across different markets and can affect the ability of companies to access real time information about supply chain risks, particularly when data localisation is accompanied by data flow prohibitions.6
Getting it right on cross-border data flows is key. Recent evidence from a joint OECD-WTO report suggests that the absence of data flow regulation would be associated with negative economic outcomes. While trade costs would fall, so too would trust, leading to a near 1% reduction in GDP. The economic costs of the full fragmentation of approaches to cross-border data flows would also be high, leading to losses in GDP of 4.5%. By contrast, approaches to cross-border data flows which balance the trade costs associated with data regulation with the trust benefits of data safeguards can deliver important benefits, increasing global GDP by 1.7% and exports by over 3.5% (OECD/WTO, 2025[17]).
The increase in digital trade openness and integration needs to continue
Countries have increasingly been engaging in international regulatory co-operation over digital trade. This includes trade discussions, notably ongoing negotiations between 91 WTO Members under the Joint Initiative (JI) on e-commerce; growing digital trade provisions in regional trade agreements (RTAs); and new Digital Economy Agreements (DEAs) touching on new and more diverse issues, including digital identities, AI and SMEs (López-Gonzalez, Sorescu and Kaynak, 2023[19]). Beyond the trade discussions, co-operation also involves the more widespread adoption of instruments with implications for digital trade across different fora, including at the Asia Pacific Economic Co-operation (APEC), the OECD and the United Nations Commission on International Trade Law (UNCITRAL) (Nemoto and López-González, 2021[20]).
These discussions matter because they will improve the ability of businesses to deploy digital solutions and operate across different markets. Two messages emerge from tracking these discussions using the new OECD Index of Digital Trade Integration and Openness (INDIGO).
The first message is that digital trade integration and openness, whether in the context of trade or non-trade discussions, has been growing. In the area of trade (Figure 6.12a), most progress is on issues related to market openness, thanks to existing WTO instruments such as the E-commerce Moratorium, the Information Technology Agreement and the Telecoms Reference Paper. Progress in digital trade integration has also been steady, thanks to the introduction of digital trade provisions in trade agreements. From 2017 onwards, the enabling of e-commerce started to grow as countries continued to implement the Trade Facilitation Agreement. Since 2000, nearly half of new agreements have some sort of digital trade provision (López-Gonzalez, Sorescu and Kaynak, 2023[19]). Where international discussions on non-trade instruments are concerned (Figure 6.12b), there has been strong progress to recognise e-signatures and e-contracts through the adoption of United Nations Commission on International Trade Law (UNCITRAL) instruments which helped enable e-commerce. OECD Privacy Guidelines and the Asia Pacific Economic Co-operation Cross Border Privacy Rules (APEC CBPR) has helped build trust in e-commerce. There has also been great success in establishing the regulatory frameworks to allow data to flow freely but with trust, including through the Global Cross-Border Privacy Regulation, and the Council of Europe’s Convention 108. Lastly, wider digital economy issues reflect recent instruments on competition, digital identity, base erosion and profit shifting (BEPS) in taxation, and artificial intelligence.
The second message is that there is still some way to go to fully integrate the global economy; despite the progress, fragmentation remains the norm rather than the exception. The indicators suggest that, taking into account all existing trade initiatives, global digital trade integration and openness is only 8% of the way towards what could be considered as full openness (an INDIGO of 1).
Supply chains that are “aligned” are supply chains where all partners have incentives to improve the performance of the entire chain. If we include governments among the stakeholders involved in international supply chains and their regulatory environment, aligning strategies among governments and between firms and governments is another important key to resilient supply chains (Figure 3.16).
International co-operation is fundamental for addressing the systemic nature of supply chain vulnerabilities and the cross-border nature of regulatory challenges. The first objective of such co-operation is to improve transparency and build confidence in supply and trust in global markets to avoid harmful policy choices, such as panic buying or hoarding by governments. The Agricultural Market Information System (AMIS) is a good example of an initiative that reduces market uncertainty and prevents harmful policies when there are disruptions in agriculture and food supply chains (Deconinck et al., 2023[21]). A second objective of international co-operation is to collectively set rules and co-ordinate and harmonise regulations to put in place the trade facilitation measures, pro-competitive rules for services supporting supply chains and the digital trade integration discussed in the previous sections. Such co-operation can be bilateral, regional or multilateral, through trade and investment agreements or through international fora. While levels of ambition may vary, what is important is the concerted policy alignment, continued dialogue and shared investment to promote resilience.
While regional trade agreements often cover policies that have been identified to create agility and adaptability, some specific agreements on supply chains have been recently introduced. For example, the Indo-Pacific Economic Framework (IPEF) for Prosperity Supply Chain Agreement (signed on 14 November 2023) presents an innovative approach to enhancing supply chain resilience at a regional level. Although not binding in terms of trade commitments, the agreement sets shared expectations for partners to: (1) identify and monitor supply chains for critical sectors and key goods; (2) improve co-ordination and response during crises; (3) strengthen supply chain logistics; (4) enhance the role of workers and boost workforce development; and (5) identify opportunities for technical assistance and capacity building. The agreement foresees the creation of an IPEF Supply Chain Council in charge of overseeing the development of action plans for specific critical sectors to help companies address bottlenecks in supply chains. Moreover, a Crisis Response Network will be established to provide an emergency communications channel for IPEF partners during supply chain disruptions. This new approach relies on the commitment and collaborative efforts of member countries to be operationalised.
However, one should keep in mind that it is firms that operate supply chains and that have direct control over sourcing strategies, inventory management and distribution networks. This is why co-ordination between governments and the private sector is key for building resilient supply chains. Public-private partnerships (PPPs) offer a structured mechanism to align the efforts of firms and governments. They can incentivise firms to invest in resilience (Hajarath and Vummadi, 2024[22]). Co-ordination with the private sector can also be about exchanging data and creating visibility and can also focus on strategies to enhance preparedness for unpredictable major crises (Box 6.3).
The creation of an “industrial commons” involving stakeholders from the government and private sector can be a useful tool to establish integrated forms of emergency preparedness (Sodhi and Tang, 2021[23]). This approach combines redundancy and flexibility to address supply chain disruptions effectively (Figure 6.13). The first layer in the strategy consists of agreeing on levels of inventories that allow for the absorption of small fluctuations in demand. These stockpiles can also ensure supply at the beginning of an emergency before activating the second and third layers. For the second layer (major crises), firms and the government have organised in advance some backup capacity with an agreement on who will deploy the additional capacity. The third layer is for extreme crises where inventories and backup capacity are not enough to meet peak emergency demand. These unforeseen needs have to be met by standby capabilities, including upfront agreements on the reconversion of manufacturing facilities and the creation of additional capacity (with investments and funding arrangements already in place). This approach requires assembling members, mechanisms and protocols in advance and maintaining them through regular rehearsals to ensure readiness.
To facilitate the creation of an industrial commons – and more generally to integrate independent decision making and align interests between firms and governments – “preparedness conferences” can be convened involving public-private stakeholders. These conferences would allow firms and governments to exchange information and co-ordinate their respective risk management strategies. They would also involve the collaborative design of playbook templates for specific crisis scenarios where participants would describe their preparedness in terms of human resources, knowledge management, process management, resources and community (the five components of preparedness). The preparedness conferences could also be used to stress-test the industrial commons through regular reviews to update and rehearse the plan for specific emergencies
References
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← 1. Examples include: Australia bill banning imports made using forced labour (2021); US Customs and Border Protection Forced Labour Trade Law (2022); Canada BILL S-211 enacting the Fighting Against Forced Labour and Child Labour in Supply Chains Act (2023); Mexico Forced Labour Law (2023); EU ban on products made with forced labour (2024); UK Environment Act; EU Deforestation regulation (2023); EU Carbon Border Adjustment Mechanism (2023).
← 2. Scope 3 emissions are the result of activities from assets not owned or controlled by the reporting entity, but that the entity indirectly affects in its value chain (both its upstream and downstream activities).
← 3. The OECD Services Trade Restrictiveness Index (STRI) is an evidence-based tool that offers an overview of regulatory barriers across 22 major sectors and 51 countries. Updated annually, the STRI also monitors recent regulatory trends, facilitates benchmarking of services policies against global best practices, and enables analysis of the impact of reform options. For more information, see https://www.oecd.org/en/topics/services-trade-restrictiveness-index.html.
← 4. This is despite 80 countries taking part in the Information Technology Agreement.
← 5. This was the subject of a new initiative to improve supply chain data flow (American Presidency Project, 2022[24]).
← 6. See Del Giovane, Ferencz and López González (2023[25]) for a discussion of issues around data localisation in cloud computing.